General Motors on Friday said that the accounting issue at the residential mortgage subsidiary of General Motors Acceptance Corp. that is slowing its 10-K filing with the Securities and Exchange Commission will not necessarily slow its effort to sell a controlling stake in the lending arm, according to Dow Jones.
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GM spokeswoman Toni Simonetti told the news agency that “it is not clear that this would change anything in terms of a transaction.”
She reportedly said the company uncovered the ResCap, short for Residential Capital Corp., accounting issue in “routing auditing,” and declined to give an update of how the GMAC sale is proceeding – Dow Jones noted that news reports have indicated a sale of the unit is close.
In a statement issued late on Thursday, after share trading had closed, GM characterised the issue as an “erroneous classification of cash flows from operations instead of cash flows from investing activities.”
Dow Jones said that, while the snafu is technically an accounting issue, analysts, and potentially suitors for the GMAC unit, will be anxiously anticipating how much cash will be moved from the critical operations category.
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By GlobalDataSimonetti told the news agency the company will disclose the amount of cash within the next two weeks when it files its 10-K.
According to the report, GM is looking to sell a controlling stake in GMAC in an effort to boost the lending arm’s credit rating from junk status – Moody’s Investors Service on Friday placed GMAC’s B2 long-term on review for possible downgrade. It partially cited fear that “further delay in meeting the company’s filing requirements could impede prospects for GM’s proposed sale of a majority interest in GMAC.”
Commerzbank analysts told Down Jones sophisticated buyers looking at taking a 51% stake in GMAC aren’t likely to be too bothered by such a disclosure.
“We doubt whether the kind of sophisticated private buyers (with no public shareholders on their backs) willing to make an investment north of US$10 billion in GMAC would really be put off by another accounting restatement,” Commerzbank analyst Philip Watkins reportedly said in a note.
According to Dow Jones, Watkins also said that it won’t necessarily delay a GMAC sale since it “does not actually appear to be imminent” as GM is reportedly still working through the bids of serious buyers. But, if the 10-K delay stretches on for too long, it could become problematic for a GMAC sale, he reportedly said.
